Owing to various factors behind their performance, some stocks and sectors have outshined others, including the biggest and the oldest players of the local industry, in 2021, while some others have remained unsuccessful in doing well.
The year 2021 saw substantial efforts plugged into Pakistan’s Information and Communications Technology (ICT) sector, which helped the country position itself around startups and innovation for fueling economic prosperity.
Although individual stock performances vary, each sector has certain characteristics that can make it a good, okay, or bad investment. To that effect, let’s have a look at Pakistan’s top-performing stocks and sectors from 2021 that excelled even some of the major industry players.
Tech & Textile Spinning Were Winners in 2021
According to a research report published by Topline Securities, 2021’s top-performing sectors were technology and textile spinning, with returns of 37 percent and 35 percent respectively, based on market cap. In comparison, the benchmark KSE-100 index gained by only one percent (or -9 percent in $ terms) in the same period.
The technology sector, in line with the global trends, continued to remain the investors’ favorite sector post-pandemic. Pakistan’s rising IT exports, government focus to facilitate the IT sector, and PKR devaluation have led to higher sales and profitability for the tech sector.
The textile spinning sector also posted strong gains in 2021 amid rising exports, record cotton prices, and huge inventory gains during the year.
In contrast, the tobacco and refinery industries continued to do poorly, with decreases of 35 percent and 29 percent respectively (due to duty and tax avoidance).
The refinery sector was amongst the worst performing sectors primarily due to delays in refinery policy and news reports of with drawl of certain incentives that were previously announced.
The Topline research assumes that sectors with a minimum market capitalization of $150 million adjusted for new listings. Similarly, for stocks, the research suggested that in 2021, companies with a minimum free-float market capitalization of $15 million typically average minimum traded value of Rs. 15 million.
Small and Mid Cap Stocks Outperformed the Local Bourse by a Mile
Telecard (TELE) was the market’s best-performing stock in 2021, with a stock value that increased by more than five times. According to the Topline research, investors were enthused about the company’s expanding profitability and hopes for its wholly-owned subsidiary Supernet’s upcoming IPO.
Furthermore, the award of long-term business contracts to supernet and opportunities that may arise from the technology sector boom is also seen as a positive for the stock.
TELE was closely followed by TPL Properties (TPLP) and System Limited (SYS), both of which saw significant advances in 2021. In 1H2021, TPLP finalized the sale of its first property project, Centrepoint, for Rs. 8 billion, achieving a 130 percent return on investment. The company also plans to establish its REIT in FY22, which piqued the interest of investors throughout the year.
Systems Limited (SYS), Pakistan’s largest listed IT firm, remained amongst the top-performing stocks for the second consecutive year as the company continued to post strong profitability growth of 56 percent in 9M2021.
Hascol Petroleum (HASCOL) was the worst-performing stock of 2021. HASCOL’s stock was severely impacted by the news of its loan default and governance issues.
Azgard Nine (ANL) was also among the worst-performing shares in 2021, with a 29 percent drop in profitability at a time when the textile sector’s total profits were rising. Uncertainty about the outcome of the company’s financial restructuring also impacted the shares.